HOLLYWOOD SHOPPING CENTRE OWNERS COMMITTEE LTD v. THE INCORPORATED OWNERS OF WING WAH BUILDING MONGKOK KOWLOON

HCA1582/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1582 OF 2007

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BETWEEN

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DECISION

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INTRODUCTION

1.  This court has, after trial, delivered a Judgment on 16 August 2010 (“Judgment”).  The background of the disputes between the parties has been set out in the Judgment.  For the purpose of this Decision, it is not necessary to repeat the details of the background.  In the discussion below, I shall adopt the nomenclature and abbreviations used in the Judgment.

2.  The crux of the dispute between the parties concerns the right to use the Canopy (especially for advertising purposes, which was the way the Canopy was put to use by the plaintiff).  An outline of the plaintiff’s case, the defendant’s case and the core issues in dispute can be seen from paragraphs 14 to 17, 20 and 21 of the Judgment.

3.  As noted in paragraph 9 of the Judgment, Advertisement Boards were affixed to the Canopy for the purpose of putting up commercial advertisements.  It is the plaintiff’s pleaded case that it was entitled to do so as it has assumed full management and control of the Shopping Centre since around June 1985.  At the beginning of the trial, the plaintiff, through its trial counsel, conceded that the Canopy was and is part of the common parts of the Building (see paragraph 20(2) of the Judgment).  After trial, this court dismissed the plaintiff’s claim for adverse possession in respect of the Canopy (a claim which was not vigorously pursued at the trial although the plaintiff’s counsel indicated that he did not have express instructions to abandon the claim) (see paragraphs 20(1), 35 and 99 of the Judgment).

4.  In the Judgment, this court granted an injunction restraining the plaintiff from putting up or allowing any other party to put up any advertisement boards, signage, notices or any other objects at the Canopy (see paragraph 99(4) of the Judgment).  In addition, this court ordered the plaintiff to demolish the Advertisement Boards and to provide an account to the defendant in respect of the “net profit” that the plaintiff has derived from the putting up of Advertisement Boards at the Canopy (see paragraph 99(5) and (6) of the Judgment).

5.  On 30 August 2010, the plaintiff lodged an appeal against the Judgment by filing a Notice of Appeal.  The Notice of Appeal was amended on 9 November 2010 and re-amended on 30 December 2010 (“Re-Amended Notice of Appeal”).  In addition to the plaintiff’s appeal, there are three further developments.

6.  First, there is the plaintiff’s application for a stay of the operation of the injunction so that the plaintiff or its agent would be at liberty to put up advertising boards at the Canopy (see the plaintiff’s Summons dated 6 January 2011).

7.  Second, the parties have dispute over the proper meaning of the expression “net profit” as used in paragraph 99(6) of the Judgment.  This second matter was raised by way of an application by the defendant’s solicitors.  Upon considering the matter, I directed that this dispute be dealt with on paper.

8.  Third, the defendant raises the question of whether the defendant has properly complied with the order of this court directing the plaintiff to demolish the Advertising Boards.  Like the second matter, I also take the view that it would be more cost-effective to determine this third matter on paper without an oral hearing.

9.  This Decision deals with these three aspects of dispute between the parties.

STAY OF EXECUTION

10.  The parties have no dispute over the correct principles to be applied to an application for stay of execution.  In any event, the relevant principles have been clearly explained in cases such as Star Play Development Ltd. v Bess Fashion Management Co. Ltd [2007] 5 HKC 84 (at paragraphs 6 to 10).  Insofar as may be necessary, the relevant principles can be summarized as follows :

(1)   the burden is on the appellant to justify a stay of execution by showing that there are good reasons for stay;

(2)   the existence of a strong ground of appeal or strong likelihood of success on appeal is by itself a good reason for stay. But in the majority of cases, it is undesirable and unnecessary to go deeply into the merits and strength of an appeal;

(3)   if an appellant only has an arguable appeal, he will have to provide additional reasons as to why a stay is justified. A commonly recognized good reason is that an appeal will be rendered nugatory if no stay is granted. To determine that question, the court may have regard to the nature of the order being appealed against;

(4)   however, in considering whether to exercise to grant a stay, the court must not forget the position of the successful party, and it is always relevant to consider the prejudice that would be caused to the successful party in the event a stay is granted; and

(5)   ultimately, the court embarks on a balancing exercise and uses its common sense, with the starting point that the successful party is not to be deprived of the fruits of his success.

11.  In my view, applying the principles expounded in cases like Star Play, the plaintiff has failed to demonstrate that a stay of execution is warranted in the present case.

12.  The starting point is the merits of the appeal, an aspect which this court has to form a preliminary view even though it is neither practical nor desirable to go deeply into the merits or strengths of the plaintiff’s pending appeal (see Star Play, at paragraph 9(5)).  In this regard, the plaintiff would face the difficulties arising from the position adopted by its counsel at the trial (see paragraph 20 of the Judgment).  I point this out not by way of any criticism to the plaintiff’s trial counsel.  I only seek to highlight the state of affairs which is relevant for considering the likely outcome of the plaintiff’s appeal.  In fact, I am of the view that the approach adopted by the plaintiff’s trial counsel was both understandable and fair.

13.  In any event, at this hearing for stay of execution, the plaintiff’s counsel (who did not appear at the trial) fairly did not seek to argue this stay application on the basis that the plaintiff has a strong appeal or a strong likelihood that the appeal would succeed.  In the circumstances and for the purpose of this stay of execution application, I would proceed on the basis that the plaintiff has an arguable appeal.  As pointed out in Stay Play (at paragraph 9(6)), the existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay; it is only the minimum requirement before a court would even consider granting a stay.

14.  The main differences between the parties and the key question that calls for determination is whether the absence of a stay would render the plaintiff’s pending appeal nugatory.  Having considered all the evidence and submissions by the parties, I am of the view that the answer is in the negative.  I do not think that the absence of a stay would render the plaintiff’s pending appeal nugatory.

15.  As is made clear by the plaintiff, the purpose of this stay application is to enable the plaintiff (through its agent) to put up new advertising boards at the Canopy pending the final determination of the appeal.  Accordingly, if there be no stay, it would only mean that the plaintiff would be unable to allow advertising agents to procure or solicit commercial advertisements to be put up at the Canopy.  This means that if the plaintiff’s appeal is allowed, it would have suffered financial loss (i.e. loss of advertising revenue).  According to the evidence adduced by the plaintiff, the total financial loss is estimated to be around HK$462,000.  There is no suggestion, let alone evidence, that there would be any loss beyond financial loss (such as any irreparable damage to the plaintiff).  There is also no suggestion or evidence that such financial loss, if suffered, would ruin the plaintiff.  Indeed, on the evidence, I do not see how such a suggestion can be made.  Nor is there any suggestion that the defendant would not be financially capable of compensating the plaintiff for such financial loss.  Besides, as pointed out by counsel for the defendant, the plaintiff can pursue against the individual owners under section 17 of the Building Management Ordinance in the event the defendant fails to pay.

16.  In the circumstances, I do not see how the plaintiff can contend that the absence of a stay of execution would render its pending appeal nugatory.  This is certainly not the type of cases where the absence of a stay would cause irreparable or irreversible damage.

17.  The above is, in my view, sufficient to dispose of the plaintiff’s application for stay of execution.  For the sake of completeness, I shall also deal with another aspect.  There is no dispute that the structure that facilitates advertisement boards to be put up at the Canopy constitutes unauthorised building work contrary to section 14 of the Building Ordinance, and the Building Department required the same to be demolished (see paragraphs 3 to 5 of the 2^nd Affirmation of Tang Kam Wah Edwin Peter filed on 20 January 2011).  That being the situation, if this court were to simply allow a stay, it would have the effect of condoning an illegal act.  That, as a matter of principle, cannot be right.

18.  In response, the plaintiff stressed that its agent intended to apply to the Buildings Department for approval before putting up advertisements at the Canopy (see paragraph 13 of the 2^nd Affirmation of Cheng Kan Kwong filed on 31 January 2011).  At the hearing of this stay application, counsel for the plaintiff effectively suggested that the Buildings Department’s approval be made a condition for the stay of execution.

19.  However, I do not think such an approach suggested by the plaintiff can justify a stay.  There is no evidence, whether from the Buildings Department or otherwise, on the likelihood of the plaintiff obtaining such approval from the Buildings Department.  On the contrary, looking at the available evidence (especially the letter dated 20 August 2009 issued by the Buildings Department), it is difficult to see why the Buildings Department would change its stance and grant such an approval.  Besides, in light of the issues to be canvassed in the plaintiff’s appeal (which includes the plaintiff’s entitlement, if any, to use the Canopy), there may even be issues as to whether the plaintiff has the requisite locus standi to make the application to the Buildings Department.

20.  In any event, this line of argument made on behalf of the plaintiff does not change the fact that the only loss suffered by the plaintiff (if there be no stay of execution) would be financial loss and thus would not have rendered the appeal nugatory if there be no stay.

21.  By reason of the matters discussed above, I dismissed the plaintiff’s application for a stay of execution as per its Summons dated 6 January 2011.  I also make an order nisi that the costs of and occasioned by the plaintiff’s application for stay of execution be paid by the plaintiff to the defendant, to be taxed if not agreed.

MEANING OF “NET PROFIT”

22.  The next matter that calls for determination concerns the parties’ dispute over the proper meaning of the expression “net profit” in paragraph 99(6) of the Judgment, which reads as follows :

“[Unless] the amount can be agreed by the parties, an account to be taken of all sums due from the Plaintiff to the Defendant in respect of the net profit that the Plaintiff has derived from the putting up of the Advertising Boards at the Canopy pursuant to the Renewed EAAL Contract since 30 November 2008.”

23.  After the Judgment was delivered, solicitors for the plaintiff (Messrs John Ip & Co) delivered to the defendant’s solicitors (Messrs Woo Kwan Lee & Lo) a Statement of Account for the purpose of showing the “net profit” of the plaintiff under cover of their letter dated 23 October 2010.  The gross income from the Advertising Boards amount to HK$2,265,850.00 for the period from 1 December 2008 to 31 December 2010.  However, this Statement of Account revealed that the plaintiff did not have any profit to account to the defendant as the plaintiff is suffering from a deficit.  This is because, according to the plaintiff, the income derived from the Advertisement Boards was applied to subsidy the management expenses incurred by the plaintiff in respect of Hollywood Shopping Centre as a whole.  Since the other management expenses of Hollywood Shopping Centre exceeded the overall income including the income derived from the Advertising Boards, there was thus a deficit.  In other words, it is the plaintiff’s case that it is entitled to take into account its other expenses incurred for the Hollywood Shopping Centre when ascertaining or accounting for the “net profit” pursuant to paragraph 99(6) of the Judgment.

24.  The defendant disagrees with the plaintiff.  The defendant’s position can be seen from their solicitors’ letter dated 25 October 2010 to the plaintiff’s solicitors, which was followed by a reply from the plaintiff’s solicitors dated 27 October 2010.  In short, it is the defendant’s case that the expression “net profit” in paragraph 99(6) of the Judgment means the difference between the gross receipts of incomes of the Advertising Boards less the expenses incurred exclusively for the Advertising Boards.  According to the defendant, the plaintiff should not pull its other expenses unrelated to the Advertising Boards in the hotchpotch when determining the “net profit” for the purpose of paragraph 99(6) of the Judgment.

25.  As stated above, I took the view that the matter can be disposed on paper without an oral hearing so as to save costs.  Having considered the matter and the parties’ written submissions, I agree with the defendant on the proper meaning of “net profit”.  That was the very meaning that this court intended to convey when the Judgment was delivered.  Indeed, I fail to see how any other meaning could be attributed to the expression “net profit” as used in paragraph 99(6) of the Judgment.  The parties’ dispute in this action concerned the use of the Canopy and the Canopy only.  Accordingly, when the order of account was made in paragraph 99(6) of the Judgment, the expression “net profit” means the gross profit derived from the Advertising Boards less the expenses or expenditure that were incurred exclusively in respect of the Advertising Boards.  Notwithstanding the careful arguments advanced on behalf of the plaintiff, I cannot see how the plaintiff would be entitled to take into account other expenses that it incurred for managing Hollywood Shopping Centre (i.e. expenses not related to the Advertising Boards).  The defendant’s understanding of the expression “net profit” is the only one consistent with the way the expression “net profit” is used in paragraph 99(6) of the Judgment.  In the circumstances, the plaintiff should re-do their Statement of Account.

26.  In respect of this dispute over the meaning of “net profit”, I also make an order nisi that the plaintiff do pay the costs of and occasioned by this paper application and determination to be taxed if not agreed.

DEMOLITION

27.  In paragraph 99(5) of the Judgment, I ordered that the plaintiff shall (within 14 days from the Relevant Date[1]) to demolish or procure the demolition of all the Advertisement Boards that were put up or allowed to be put up at the Canopy pursuant to the Renewed EAAL Contract and that remain on or after the Relevant Date.

28.  In their letter dated 21 December 2010, the defendant’s solicitors suggested that the Relevant Date fell on 30 November 2010.  This does not appear to be disputed by the plaintiff (see the letter dated 17 December 2010 from the defendant’s solicitors and the letter in reply dated 20 December 2010 from the plaintiff’s solicitors).

29.  What is in dispute between the parties is the extent of demolition required under paragraph 99(5) of the Judgment.  The defendant complains that only platform displaying the advertisement has been dismantled within the 14-day period stipulated in paragraph 99(5) of the Judgment.  However, the supporting structures such as the steel framework and other ancillary structures or installations which are used to mount the platform remain in place (see the photograph attached to the letter dated 21 December 2010 from the defendant’s solicitors).  The defendant takes the view that the plaintiff has failed to fully comply with paragraph 99(5) of the Judgment.  The plaintiff disagrees.  A summary of the plaintiff’s position can be seen from its solicitors’ letter dated 20 December 2010.

30.  Having considered the matter, I agree with the defendant’s contention and reject that of the plaintiff.

31.  As noted above, the parties’ pleaded cases and the core issues can be seen from paragraphs 14 to 17 and 20 to 21 of the Judgment.  It is important to note that :

(1)   although not vigorously pursued at the trial, one of the issues raised by the plaintiff was the question of adverse possession by the plaintiff of the Canopy; and

(2)   if the plaintiff’s claim for adverse possession failed, a further question that was in dispute at the trial was whether the plaintiff was nevertheless entitled to put up the Advertisement Boards at the Canopy; and if not, what remedies should be granted to the defendant (see paragraph 21 of the Judgment).

32.  After trial, this court dismissed the plaintiff’s claim for adverse possession (see paragraph 35 of the Judgment).  This court also held that the Advertisement Boards put up or allowed to be put up by the plaintiff at the Canopy constituted a contravention of section 34I(1) of the BMO and a breach of the DMC, and that no defence of acquiescence, laches or waiver could be set up by the plaintiff after 30 November 2008 (see paragraph 97(1) and (3) of the Judgment).  It was on this basis that the order of demolition was made in paragraph 99(5) of the Judgment.  Accordingly, the order to demolish the Advertisement Boards contained in paragraph 99(5) of the Judgment means that any structure put by or allowed to be put by the plaintiff for putting up the Advertisement Boards should also be demolished.

33.  In respect of this dispute over the issue of demolition, I also make an order nisi that the plaintiff do pay the costs of and occasioned by this paper application and determination to be taxed if not agreed.